Judge stops Apple shareholder vote on preferred stock vote

U.S. District Judge Richard Sullivan in Manhattan handed David Einhorn, founder of the Greenlight hedge fund, a victory in his court battle with Apple on Friday, blocking the Cupertino-based company from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock, reports "Reuters" (http://tinyurl.com/b3tbasv)

The vote was scheduled for Feb. 27 as part of the company's annual stockholders' meeting. Greenlighthas been urging Apple to share its cash with investors by issuing high-yielding preferred shares, alleged in a lawsuit that the company unfairly lumped a stock restriction with two other corporate governance matters set for a vote by investors on Feb. 27.

Lawyers for Greenlight Capital argued that putting into one proposition three separate items -- two of which Einhorn supported and one (which barred Apple's board from issuing preferred shares without a shareholder vote) he vehemently opposed -- was a clear violation of SEC regulations against such "bundling."

Today U.S. District Judge Richard Sullivan said he was inclined to agree. However, less clear is whether Greenlight had proved that it would suffer the "irreparable harm" required for the judge to issue a preliminary injunction blocking the vote, reports "CNNMoney." Besides, no matter how the vote went, he said, Einhorn was unlikely to get Apple to issue the preferred shares he had been lobbying for, the article adds.

Recently, Greenlight began urging (http://tinyurl.com/ba2aytc) fellow shareholders of Apple to oppose the company’s attempt to amend its corporate charter. Apple has responded with the following statement:

"By early last year, Apple’s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.

"We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.

"Apple’s management team and Board of Directors have been in active discussions about returning additional cash to shareholders. As part of our review, we will thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock. We welcome Greenlight’s views and the views of all of our shareholders.

"As a part of our efforts to further enhance corporate governance and serve our shareholders’ best interests, Proposal #2 in our proxy includes some recommended changes to our articles of incorporation. These changes were recommended independently of Greenlight’s proposal and would not preclude Apple from adopting their concept. Contrary to Greenlight’s statements, adoption of Proposal #2 would not prevent the issuance of preferred stock. Currently, Apple’s articles of incorporation provide for the issuance of 'blank check' preferred stock by the Board of Directors without shareholder approval. If Proposal #2 is adopted, our shareholders would have the right to approve the issuance of preferred stock. As such, Proposal #2 has the support of many of our shareholders.

"We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value."

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